The political debate over fiscal discipline may be getting all the headlines. But it’s the debate between investors on the issue that will matter for the euro.

As the euro-zone debt crisis has evolved, both politicians and investors have generally agreed that fiscal discipline was a good thing. Across the globe, countries cutting deficits by reducing spending and raising taxes were praised.

Austerity was very much in vogue and meeting fiscal targets was nearly de rigour to attract investors.

Sterling was a prime example. The more the U.K. government insisted it was sticking to belt-tightening, the more investors saw the pound as the place to be.

However, that consensus could be changing.

With the U.K. economy still shrinking and with many peripheral euro-zone countries facing fresh recession, calls for pro-growth policies are taking on a new urgency.

In fact, there is now a school of thought fully acknowledging that fiscal discipline on its own isn’t enough to reduce deficits. Unless steps are taken to promote some level of economic expansion, deficit countries will simply find themselves facing a never-ending spiral of recession.

Renewable-energy returns in Italy had become so high they were “the envy of drug pushers,” in the words of Environment Minister Corrado Clini. The technocrat government of Prime Minister Mario Monti, appointed to tame the country’s towering debt pile with austerity measures and budget cuts, changed all that this week.

To nobody’s surprise, the government has slashed aid to green energy. Incentives for solar-power generation will be cut by about 35% on average later this year, while those for the non-solar energy sector will be reduced by around 10% to 15% from 2013. Government officials estimate the new system will allow Italians to save about €3 billion a year.

The government says the new incentives bring public support for the sector more in line with other European countries and take into account a decline in the cost of generating energy from renewable sources stemming from new technologies and economies of scale.

As an example of the kind of returns being made today, one needs only to look at the incentives: an investor in photovoltaic energy in Italy receives €313 per megawatt-hour, compared with a European average of €160. This will drop to €199 with the new system.

President Nicolas Sarkozy of France greets Italian Prime Minister Mario Monti, right, at a tripartite meeting with German Chancellor Angela Merkel in Strasbourg, France, on Thursday.

So it’s official. Italian consumer confidence jumped in November in a shift that can only be explained by Mario Monti’s rise to power.

The consumer confidence index jumped to 96.5 from 93.3 in October, driven by huge jumps in sentiment towards the “economic climate” and the “future climate,” the Istat statistics agency reported Thursday.

It was the first improvement in six months, and shows that Mr. Monti “enjoys very broad support in the population to pursue his strategy”of deep structural reforms, said Erik Nielsen, chief economist at Unicredit.

The change is notable given that bond markets have not given Mr. Monti such a hearty welcome. Italian government bond yields remain 6.5 percentage points higher than Germany’s at the two-year mark. That’s higher than they were when Silvio Berlusconi was still in power at the end of last month, suggesting intense concern of an ugly surprise in the fairly near term.

The more upbeat tone also comes at a time when all Italian media are talking about the likelihood of yet more and new kinds of taxes, of tougher pension requirements, of a looming credit crunch for small businesses and the possibility of a recession.

If reality is stranger than fiction, perhaps residents of Europe’s troubled periphery would like more of the latter.

Earlier this week, Umberto Eco, author of “The Name of the Rose” as well as erudite essays on how medieval comedy often sought to provide relief to underlying tragic facts, was asked by the British Broadcasting Corp. if he might serve in Italian Prime Minister Mario Monti’s new cabinet of technical ministers.

Eco said no.

But other authors are vying for advisory roles of a sort. A more obscure novel, published in July, offers its view of where things are going.

Enzo Varricchio’s “That Summer Before The End Of The World” is set in the summer of 2012, but some of its thinly-veiled episodes have already become true.

For a few heady hours Monday, financial markets wanted to believe in Italy and even Greece.

It was: out with the politicians and in with the technocrats who understand the magic levers of money and debt. By lunchtime it all turned bad again, for at least two reasons.

First, news of a sharp contraction in euro-zone September industrial output brought a crushing reminder that Europe most likely is heading into at least a mild economic recession. Deficit reduction along Europe’s Sun Belt is now doubly difficult as tax receipts dry up in a contracting economy. That international lenders will demand still more austerity measures to close the gaps is almost a given, risking turning a mild recession into potentially something graver and deepening fiscal deficits.

Take Greece, which started its fiscal belt-tightening two years before Italy. Greek data shows net tax revenue for the first nine months of this year was down 4.2% from the same period a year earlier. The overall budget deficit had widened by 15.1% over that period.

Second, ousting the temporizing political leaders who brought Italy and Greece to this pass doesn’t take the politics out of the process. The new cabinets of Italy’s Mario Monti and Luca Papademos of Greece, highly experienced European financial functionaries, will be backed by parliamentary votes of confidence later this week.

This is where the real battle for the heart and soul of the European Central Bank begins in earnest.

Up until now, the bank has just been tinkering in the sovereign bond markets.

It has run to the rescue of peripheral debtors as needed, providing funding while politicians put together a more sustainable bailout mechanism through the European Financial Stability Facility.

The ECB’s role has hardly been an easy one.

Its bond purchases have essentially breached its central bank mandate for providing price stability in the euro zone and have frequently attracted criticism from stronger member countries, such as Germany and the Netherlands.

Also, while the size of its purchases have had to be gauged to prevent the yields of peripheral debtors from rising too far, and spreading the risk of financial contagion, the purchases have also had to be limited to levels that couldn’t be seen as bailing out the politicians of these countries.

Both aspects of its role will come under even greater scrutiny in coming weeks.

Euro-zone sovereign bond markets will remain front and center next week, with debt auctions totaling around €19 billion due at a time when even Germany is struggling to sell paper and borrowing costs are at dangerously elevated levels as investors begin giving up on the euro-zone breaking the political gridlock that is blocking a more decisive response to the currency bloc’s debt crisis.

Against this backdrop, euro-zone and European Union finance ministers will be meeting Tuesday and Wednesday to try and revive efforts to leverage the euro-zone’s temporary bailout mechanism and overcome differences over a range of issues from the role of the European Central Bank to the mandate of the region’s permanent rescue fund. On a positive note, the ministers are likely to approve the release of long overdue aid payment to Greece after the country’s political forces offered written pledges committing to reforms related to the aid package.